Michael Gove clashes with Treasury over bid to boost manufacturing

Michael Gove has clashed with the Treasury over plans to overhaul British manufacturing because of concerns about the costs involved, in a blow to his levelling up agenda.

The Housing Secretary has been warned not to go ahead with a White Paper meant to map out the future of the industry as this would suggest new investment that is not coming, The Telegraph understands.

The stand-off reflects a wider tension between Tories calling for more spending to deliver change in former Labour-held “Red Wall” seats and those with traditional constituencies pushing for tax cuts.

A government source said: “The Treasury don’t like it because it would involve a lot of money.” 

The position was made clear during a meeting of the Cabinet sub-committee working on levelling up agenda in early December, with the differences dragging on into the new year.

Mr Gove, during a round of broadcast interviews on Monday, denied the two choices were mutually exclusive and argued tax cuts can come once the economy picks back up after an injection of spending. 

Rocky road to levelling up relaunch

The definition of “levelling up”, Boris Johnson’s often-repeated phrase for his domestic reform agenda, and the policies that go with it are being worked on by Mr Gove.

At its most basic the drive is about reducing geographical inequality. Critics say it is ill-defined and encompasses a range of Government policies already being pursued. 

More than two years into the Johnson premiership, the agenda is heading for a relaunch with Mr Gove, handed the Communities brief in September, leading on the announcements.

However, the speech and “Levelling Up White Paper” have been delayed amid internal Whitehall wrangling. It had been pencilled in for late December, but may now slip to February.

One constraint is that Rishi Sunak, the Chancellor, has made clear no extra money will be allocated to the relaunch beyond the sizeable increase in departmental budgets for the next three years announced at the Budget last autumn.

Money pledged to Red Wall areas

Mr Gove wants to include a pledge to overhaul manufacturing strategy in the announcement, given the industrial slump seen in many of the poorest communities in the UK, including so-called “Red Wall” Labour heartland seats the Tories won in 2019.

The drive is an attempt to map out how after Brexit, investment and opportunities in the next generation of manufacturing can be brought to deindustrialised areas of the UK. 

Kwasi Kwarteng, the Business Secretary, would be expected to shape and lead on the manufacturing White Paper if it was announced. 

The Treasury is understood to have argued last month that including the promise of a manufacturing White Paper would raise expectations of spending beyond that announced in the last Budget. 

A Gove ally on Monday night played down the idea there was a stand-off with the Treasury over the manufacturing strategy and said the policy was not at the core of the levelling up proposals.

Research and development funding

Other ideas being worked up include how research and development funding should be spent and how some powers can be transferred from Westminster to the regions through devolution.

Mr Gove insisted there was enough money to achieve the Government’s levelling-up ambitions.

He said: “The amount of public spending already committed in the spending review is higher than any government has committed to public spending in history.

“And those budgets, both the budget in my department but also in the Department for Education, in DWP [Department for Work and Pensions], in the Department of Health and so on, that budget is there to be used, deployed and allocated to support levelling up.

“My budget was increased, and increased significantly, in the spending review and it’s as a result of that that we’ll be able to devote additional expenditure.”

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